The Three Faces of Foreclosures

Authors of Buy Low, Rent Smart, Sell High

Part Two

The second face of foreclosures is the "foreclosure sale". This occurs when the loan on the home is not brought current by the distressed seller or the home is not sold.

Again, the procedures and process have slight differences from state to state, and prospective investors will need to educate themselves as to the foreclosure sale process in their respective state. For many states, the sale of the property takes the form of an old fashioned auction on the courthouse steps (in many states this occurs on the first Tuesday of every month).

Like pre-foreclosures, this also can be quite lucrative. However, unlike pre-foreclosures, there is no emotion element other than controlling your adrenalin at the foreclosure sale. The main drawbacks are that often investors are bidding on property they have not been able to access (this makes assessing repairs and improvements quite challenging), an investor may need to quickly assess the title and any liens quickly (this can lead to mistakes and can be costly), and many states require certified funds at sale or within a very short time frame (such as 24 hours). While investors can make a lot of money with foreclosure sales, having access to large sums of cash or fast financing limits these to a subset of experienced and well-financed investors. If you're interested in this face, we suggest you go to a foreclosure sale and see how one works firsthand.

Andy Heller and Scott Frank are co-authors of the Fortune Magazine recommended book "Buy Low, Rent Smart, Sell High". Together they have purchased and sold approximately 100 residential properties (many of them foreclosed properties) on a part -time basis. Visit them at www.buylowrentsmart.com.